Government payments and farm debt utilization during the pandemic

Purpose - This study examines the heterogeneous relationship between ad-hoc support policies, high government payments, low interest rates and farm debt use across farms of different sizes and across farm operators of different races, genders and experiences to inform the 2024 Farm Bill discussions. Design/methodology/approach - Utilizing USDA’s Agricultural Resource Management Survey data for 2020 and 2021, this study characterizes the differences in short-term farm debt use and the amount of short-term debt during the COVID-19 pandemic period across several farm and farmer types using double selection LASSO and regression analysis. Findings - Results show positive associations between government payments and debt use for all farm types and farmer demographics except for residence farms and non-white farmers, which may be due to their limited access to credit. Findings also indicate that farms that could already access credit, like commercial farms, increased their short-term debt during the pandemic per the decrease in interest rates. Moreover, the 2018 Farm Bill extended certain commodity support and direct and guaranteed loan program participation provisions that were previously more closely restricted. Beginning farmers seemed more likely to use short-term debt in response to higher pandemic government payments than their more experienced counterparts. Practical implications - The insights from this study are timely and useful for policymakers for designing and implementing programs related to the new 2024 Farm Bill. Originality/value - One of the explanations for the results is that beginning farmers have been more likely to use debt than most other groups of operators, signaling the success of special credit provisions. Our results are relevant to making upcoming policies related to female and nonwhite farm and ranch operators.